3.1.1 - types of businesses Flashcards
Types of businesses
sole trader, partnership, private limited company, public listed company, social enterprise, government business enterprise
sole trader
an individual establishing and operating their own business, assuming total responsibility for the major business decisions
sole trader - advantages
simple and inexpensive to establish, no partner disputes, owner has total control over the business and keeps all profit
sole trader - disadvantages
unlimited liability for owner, business ends when owner dies (no perpetuity), burden of management
partnership
a business combined with the resources of 2-20 partners
partnership - advantages
inexpensive and simple to set up, workload may be shared, risk is shared
partnership - disadvantages
unlimited liability, potential for disputes and personality clashes, liability for debts incurred by other partners
companies
a separate legal entity that is owned by shareholders who have limited liability and is run by directors and has perpetual succession
private limited company (PTY LTD)
between 2-50 shareholders
PTY LTD - advantages
limited liability for owners (shareholders), separate legal entity, existence is not threatened by death of removal of one of the directors
PTY LTD - disadvantages
higher establishment costs, higher degree of complexity in establishing, additional compliance costs
public listed company (LTD)
listed in the ASX, at least 5 shareholders
LTD - advantages
limited liability for shareholders, able to gain extra capital through extra shares, separate legal entity
LTD - disadvantages
highly complex structure, high establishment costs, needs more accountability
social enterprise
private sector business that distributes profit to benefit the community rather than individual shareholders, uses strategies to maximise improvements for human wellbeing and environment
social enterprise - advantages
can open up new markets, and meeting a social need can have positive effects on profit and market share
social enterprises - disadvantages
might be difficult to obtain capital to start the business, can be hard to finance, significant operating cost, can be difficult to focus on both social and financial objectives
government business enterprise
a business that is government owned and operated that aims to be profitable and provide a service to the community
GBE - advantages
can carry out government policies, can operate with independence from government, healthy competition
GBE - disadvantages
political interference, can be less effective, less accountability
